The Mythmaking Continues on the Portland Aerial Tram

Last week the Oregonian told us that Portland’s $57 million aerial tram was built “on budget” even though the projected cost at the time the Portland city council agreed to build it was only $15.5 million. Now, the Seattle Times reports that the tram “already has helped spur a much broader $1 billion development of the riverfront district.”

It won’t be long before real estate promoters in Seattle, Oakland, and any other city that has 500-foot-high hills will be thumping to have taxpayers build them their own aerial trams.

Portland flushed some $57 million down the drain building a 2.4-mile streetcar line, then burned up another $34 million on extensions totalling 1.2 miles.

At an average speed of 7 mph, advocates admit that the streetcar will not save people any time (see p. 33). But they say that the streetcar isn’t about transportation, it is about urban redevelopment. According page 8 of the same document, since the streetcar opened for service, over $2.8 billion has been invested within three blocks of the streetcar line.

Rail advocates claim that the streetcar generated this development, but that is a lie. Virtually all of that development received millions of dollars of other subsidies, including waivers of property taxes and tax-increment financing of infrastructure that developers would normally have to pay for out of their own pockets. Total subsidies to the Pearl District, at one end of the streetcar line, were roughly $100 million. Total subsidies to the South Waterfront District, at the other end of the line, are expected to be at least $250 million. (Many of these subsidies are documented by Jim Karlock.)

But now Portland has also opened an aerial tram in the South Waterfront District. The tram has been described as something out of science fiction, which is true if the science fiction was written by Philip K. Dick (who wrote of a dark future dominated by greedy and corrupt politicians).

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So which is it: Did the streetcar spur the development? Or was it the aerial tram? Or were both needed (in which case cities planning streetcars alone are going to be disappointed)?

The truth is that neither were needed. The owners of the South Waterfront land were perfectly willing to build a low-rise residential project on their own, without any subsidies, streetcar, or aerial tram. But our favorite disgraced politician, Neil Goldschmidt, figured out how he could make a bundle by convincing the city to funnel hundreds of millions of dollars of subsidies to his client, Homer Williams, to build a much-more expensive high-rise development.

Goldschmidt, who also counted the landowners among his clients, also served on the board of one of the hospitals on the hill above the South Waterfront. He or someone else at the hospital conceived the idea of the aerial tram in 1998 as a way to connect the hospital to potential office space in high rises on the waterfront.

The hospital, Oregon Health Sciences University, would have built the office space somewhere. Without the aerial tram, it might have been somewhere else, but it would have been somewhere nearby. So, at best, the tram “spurred” development on land owned by Goldschmidt’s clients rather than land owned by someone else.

As Jim Karlock documents, back in 1998 Goldschmidt claimed that the tram would cost $3 to $5 million. Now we know the actual cost was $57 million. According to the Oregonian, after adjusting for inflation, the cost overrun was 165 percent.

Since the tram line is less than two-thirds of a mile long, that’s a total cost of more than $90 million per mile. For that, plus $1.7 million in annual operating costs, it can carry only 78 people each way every five minutes — and considering the limited market and $4 fare, it is likely to carry only a tiny fraction of that number.

Even if the streetcar and tram were essential to promote Homer Williams’ real-estate developments, why should Portland taxpayers be expected to subsidize these developments? Only because Williams had the right connections.

The streetcar had barely been put into operation when the Portland city commissioner who originally pushed it quit his job mid term and took a job with a consulting firm traveling around the country proselytizing for streetcars. If your city leaders have been talking about building streetcars, he is the reason why. If your city also has some hills, get ready to fight some tram scams of your own.